In the past month, the world has seen a remarkably large drop in emissions of carbon dioxide, the main driver of global warming. The reason isn’t something to celebrate, though. The coronavirus outbreak in China, which has sickened at least 77,000 people, has shut down factories, refineries and flights across the country as officials order people to stay home. Read more
Understanding and implementing enterprise risk management.
Over the past few decades, enterprise risk management (“ERM”) has been receiving increased attention by boards and executives and has undergone a continuing evolution in its development and uses. Along the way, lessons have been learned and ERM has been better understood regarding its benefits, objectives, and role in the organization.
This COSO thought paper takes advantage of lessons learned and new guidance on enterprise risk management published by COSO to provide directors and executives with a better understanding of the role of enterprise risk management in creating and preserving value and its relationship to the key strategies of the organization. While not a detailed implementation guide, this paper includes overall guidance and an outline of succinct tangible steps that can used to implement an effective ERM program.
This thought paper outlines and provides clarity on the role and value of enterprise risk management to help directors and executives answer several key questions including:
“What is the real value of enterprise risk management?”
“What is its role and objectives?
“What are practical steps that can be taken to implement enterprise risk management?
Summary
The business environment today is one in which boards of directors and senior management will continue to face rapid changes, complexities, and volatile risks. Such an environment, however, also presents them with significant new opportunities. Organizations can enhance their abilities to be successful in both addressing risks and taking advantage of opportunities by enhancing their enterprise risk management processes and integrating ERM fully into their strategy setting and performance processes. Enhancing their ERM processes starts witha clear understanding of the role of ERM in assisting the directors and management to make better decisions and achieve their strategy and business objectives. The updated COSO ERM Framework clarifies both the relationship between strategy and risk and that the objective of ERM is to assist the organization to achieve its strategy and business objectives. Understanding these two key points is not only critical for success but important in setting and communicating the risk culture of the organization.
The concepts, approach, and guidance outlined in this paper provides useful insights in how management and directors can take initial steps in implementing or enhancing their ERM processes in alignment with the new guidance. Together with COSO’s Enterprise Risk Management – Integrating with Strategy and Performanceand other COSO thought papers, this paper is a starting point and foundation for an effective ERM initiative. Any ERM initiative needs to be tailored carefully to the needs of a specific organization. The ideas and recommendations presented in this paper are neither intended to be, nor are they, the only way to implement an ERM initiative. The approach of this paper and the updated ERM Framework and related guidance provide the flexibility to tailor an ERM initiative and realize fully its benefits. Keep in mind the benefits of taking small, incremental steps and building a culture of continuous improvement.
Above all, keep the momentum going and help ensure that the organization will increase its chances of successfully achieving its strategy and business objectives though a robust management of the risks that could impair that achievement. The goal is to develop the momentum for ERM which will continue to expand and deepen the organization’s strategy setting, performance, and risk management processes in its pursuit of creating and protecting value.
PriceWaterhouseCoopers | Risk in review, 6th Annual Study April 2017*
The heart of the matter: Front-line leadership, collaborative success
It’s been almost a decade since the 2008 global financial crisis and its aftermath forced companies into a defensive risk management posture, pulling responsibilities back from the business units to the second line of defence as they fought to weather the storm.
But faced with the new challenges of today’s complex business risk environment, companies are seeing the tide shifting once again. Today a collaborative approach to risk management with risk accountability sitting squarely in the first line of defence can be the key to greater organisational resiliency and growth. That means an engaged first line that makes risk decisions in alignment with strategy. It means a proactive second line that influences decision making through effective challenge and timely consultation and collaboration. And it means a diligent, independent third line focused on its core missions of protecting the organisation and delivering value.
A risk management ecosystem led from the front line, that fosters collaboration and shared accountability across all three lines of defence, positions a company to effectively meet the challenges of today’s risk landscape. To get there, a company should:
Set a strong organisational tone focused on risk culture that starts with the board and CEO and permeates the entire organisation.
Align risk management with strategy at the point of decision making so the first line anticipates business risks when setting tactical priorities.
Recalibrate the risk management programme across the three lines of defence with the first line owning business risk decision making, the second line monitoring the first, and the third line providing objective oversight.
Implement a clearly defined risk appetite framework across the organisation.
Develop risk reporting that enables executive management and the board to effectively execute their risk oversight responsibilities.
Across the globe there are more uncontrollable fires, an increasing number of severe hurricanes, longer periods of droughts and warmer winters. The consequences of climate change are becoming more tangible. As long-term investors, we need to consider the extent to which our investments are prepared for a changing climate. Generally certain – Specifically uncertain. Read more
Can the Dutch save the world from the danger of rising sea levels?
Simon Kuper
The Netherlands has learnt to manage flooding. Climate-threatened countries are taking note. On the afternoon of January 31 1953, the sea off the Dutch coast rose so high that it attracted sightseers. Just after 6pm, national radio warned of “dangerous high water”. That was almost the only notice given. Read more
Humanity continues to face two simultaneous existential dangers—nuclear war and climate change— that are compounded by a threat multiplier, cyber-enabled information warfare, that undercuts society’s ability to respond. The international security situation is dire, not just because these threats exist, but because world leaders have allowed the international political infrastructure for managing them to erode. Read more
The report is published as critical risks are manifesting. The global economy is facing an increased risk of stagnation, climate change is striking harder and more rapidly than expected, and fragmented cyberspace threatens the full potential of next-generation technologies — all while citizens worldwide protest political and economic conditions and voice concerns about systems that exacerbate inequality.
The challenges before us demand immediate collective action, but fractures within the global community appear to only be widening. Stakeholders need to act quickly and with purpose within an unsettled global landscape.
Scanning today’s headlines, you don’t have to look far to see that the environment is front and center – from 16-year old climate activist Greta Thunberg being named TIME magazine’s Person of the Year, to the threat rising sea levels pose for our coastal areas, to increased poverty due to the impact of extreme weather events on farming. The reality of the climate crisis is stark. Read more
Here’s why accountants could be the climate heroes we all need
Zubair Abid Arain
Climate change has caused widespread destruction. Environmental degradation was responsible for 9 million premature deaths in 2015, besides causing the economic loss of hundreds of billions of dollars annually… A new accounting standard to account for climate costs might be the right approach – and there are multiple reasons why this could nudge emitters in the right direction. Read more
This top-10 of business risks misses the biggest of them all: climate change
Alison Martin
Climate change is a very real and serious threat to society. Extreme weather events such as heatwaves and flooding are becoming more commonplace and severe, leaving communities to deal with often devastating humanitarian and economic costs. Read more
Jens Burchardt, Michel Frédeau, Philipp Gerbert, Patrick Herhold, and Cornelius Pieper | Boston Consultancy Group
Around the globe, public pressure to address carbon emissions is increasing. Yet the economic debate around climate action continues to be dominated by skepticism. Regulators and corporations remain reluctant to promote ambitious abatement for fear it might hurt economic competitiveness and growth. This reluctance is increasingly at odds with economic reality. While the projected negative impact and economic risks of unchecked climate change continue to escalate, the costs of taking action are declining. For many countries, reducing emissions is even a standalone business case, as it contributes to GDP growth. Read more
PRIMO would like to draw the attention for this new magazine. It is what we need: more integration between the different worlds of craftsmanship on one hand and more synergy between the scientific and practitioners’ world.
The aim of the new journal, International Journal of Finance, Insurance and Risk Management (JFIRM) is to publish quantitative and qualitative studies from selected areas within these disciplines and other related areas such as Banking, Accounting, Auditing, Compliance, Sustainability, Behaviour, Management and Business Economics.
The main scope of the journal is to spread original academic, theoretical and practical insights and studies about these fields to a national and international audience, with the widest reach and spectrum as possible. This Journal replaces the former International Journal of Latest Trends in Finance and Economic Sciences (IJLTFES) first launched in 2011. Read more
